Jeff is on of the premier Bloggers here on Active Rain. He is very knowledgable and tells people what they need to hear, not what they want to hear. His post is about misinformation that is given by some loan officers and the Rules/Guidelines that they must follow. If you have any questions, about purchasing another home while retaining a current home which was financed using FHA, I would be glad to discuss your options.
FHA Mortgages have become increasingly more popular for 2 reasons. You just need 3.5% as a down payment and that many lenders will go down to a 620 credit score. What I am seeing now is the confusion about whether you can have 2 FHA loans because loan officers and lenders are giving the wrong information on the basic guidelines. And yes, you can have two, and even more, FHA mortgages.
Example :
Just yesterday, I had a client that was told that they need 30% down on their new property in order to have a FHA mortgage, because they currently have a mortgage. What gets worse is that this borrower has a conventional mortgage on their current property, not a FHA loan. Not only did the loan officer get the percentage down wrong, but they never asked what kind of mortgage they have now. In this example, this borrower could buy a new primary property with a FHA loan and only with 3.5% down. But beware of the Buy and Bail, mentioned below.
Why would someone have 2 FHA mortgages?
The main reason would be that borrower can't sell their current property that has a FHA mortgage because they could be under water on the house. And this could cost them additional monies just to pay off the house in order to sell it. Overall, the borrower has a need to move because they need to upgrade because of family size and or because they are relocating. But in order to do this, you have to fall into a few different categories. Please read on...
What things should you be aware of when it comes to having two FHA loans :
There are considerations in determining the eligibility for a borrower in having more than 1 FHA loan in regards to the exceptions that I will list below.The considerations are as follows :
your length of time of time on the current property that you own, that has the FHA mortgage, and
circumstances that make that same borrower want to purchase another property with a FHA insured mortgage
Policy Exceptions & Eligibility Requirements
- Increase in Family Size - If the borrower's legal dependents increase beyond a point that is not conducive to the current housing structure, that house no longer meets the family needs, the borrower must :
pay down 25% equity in their current property or 25% down on their new property, which represents a 75% LTV (loan to value)
provide satisfactory evidence of the increase in dependents & the property's failure to meet such family needs
Note : A certified FHA appraiser must do a new appraisal on the old home to determine such value. Tax assessments or market analysis reports aren't acceptable.
- Relocation - a borrower can relocate while currently having a FHA mortgage if :
relocating and
if they establish residency in an area not within reasonable distance from their current principal residence (reasonable will be different with all FHA lenders)
If the borrower returns to the area in which they currently own a property with a FHA mortgage, they are not required to re-establish primary residence in that property.
Note : The relocation doesn't need to be employer mandated in order to qualify for this exception.
- Vacating a jointly owned property - A borrower can be eligible if they are vacating a property that will be occupied by the co-borrower.
An example would be in case of a divorce and the ex-spouse will be buying a new property with a FHA mortgage.
- Non-Occupying Co Borrower - A borrower who has co-signed for another family member to purchase or refinance a primary residence with a FHA mortgage, that borrower is allowed to buy or refinance their own property with a FHA loan. This is as long as they are a non-occupying co-borrower - FHA Non-Occupant Co-Borrower loans - Also known as Kiddie Condo loans
On a temporary basis – While FHA analyzes this situation - September 18th, 2008 - ML 2008-25
Converting Exsisting Homes to Rentals - Known as the FHA Buy and Bail - This is stated in Mortgagee Letter 2008-25, which is to prevent those that knowingly give false or misleading rental information/leases in which they will just let that property fall by the waste side and not make mortgage payments.
The borrower will now need to be able to have sufficient income to qualify for both mortgage payments. There are exceptions to this rule that relate to minimum loan to values and relocation's as well, so you need to cross reference these requirements to determine if you really do qualify.
Important Information : In all the cases listed above, if the borrower doesn’t meet these exceptions, then they can only obtain a FHA mortgage if :
the homeowner pays off the current FHA loan in full or
terminate ownership of that residence
A few things to remember - Not all lenders and or loan officers are on top of these current changes and or ask the appropriate questions when determining what you can qualify for when it comes to FHA Home Loans in general. Speak to a reputable loan officer and not one that tells you what you want to hear or sounds good.
This post is something that is very well written, despite it been directed to Realtors. I believe home sellers need to read this because they control the ultimate pricing of their home. Pricing a home based upon what you WANT instead of where the market is at today, can be a mistake that could cost you time an money. As said in the post, some Realtors will list homes based upon what you WANT. Ask yourself, if they are working as the professional that you want working for you.
OVER PRICING HOMES = HIGH INVENTORY + LESS SALES + DESPERATE SELLERS = CONTINUED HOUSING CRISIS: A FORMULA FOR DISASTER IN A FRAGILE MARKET PLACE!!!
We MUST do in-depth research before we price properties!!! ....and we MUST price properties as if our lives depend on it.(...because they do!) If we don't face over-pricing head on, we will see the inventory levels climb like never before! Not only that, the desperation seen and felt by huge numbers of sellers that we witnessed during the downturn in 2008 will likely re-appear! In many markets there are still great numbers of desperate sellers.
OVER-PRICED HOMES = HIGH INVENTORY + MORE DAYS ON MARKET + LESS SALES + DESPERATE SELLERS =CONTINUED HOUSING CRISIS.
In my last blog post, I mention the above formula to the umpteenth agent who said he would take an over-priced listing but would schedule a reduction in the agreement in 30 days or 60 days. There are still huge numbers of real estate professionals who do not understand the importance of correct pricing---and we direct the whole real estate market; or at least we are supposed to!
In my last blog post HOW DO YOU HANDLE A SELLER WHO WANTS YOU TO OVER-PRICE THEIR HOME ?... I was amazed at how many agents feel it is ok to over-price a listing for a short time like 30 days ...let me remind you all that the best time to sell a listing is in the first 2-3 weeks on the market! Over-price it and you miss the best selling time!!!
Even a small amount over the correct price of a home will keep it on the market for too long! We can not afford this in this housing climate; people are desperate now (and more will get there)....but there are buyers out there and they are looking for bargains, even here, where the average income usually very high.
As a community of professionals who are looked to, by most homeowners, for our guidance and expertise, we MUST not over price homes. We need to take a stand NOW before we slip again into the abyss.
This may seem evangelistic to a lot of you but it is the basic truth: If we all take one listing with even a small of amount of over-market pricing, look at the impact! Guess who is in charge here?...We are and we MUST do what we can do to bring the housing market back to some normalcy.
PLEASE TRY TO UNDERSTAND THE URGENCY AND IMPORTANCE OF THIS!DO NOT OVERPRICE HOMES IN THIS MARKET OR WE WILL NEVER GET OUT OF THE CRISIS!!!
Paula I. Hathaway, LBA, Prudential Douglas Elliman
Top Producer, Diamond , Gold and Chairman's Circle Awards
Below is information about grant/loan funds that are available to buyers of foreclosed homes in some Northern Ohio Communites. Other Programs for Non Foreclosed homes or other Cities in Cuyahoga County. For additional information, please contact me.
FORECLOSED HOUSE BUYER DOWNPAYMENT ASSISTANCE LOAN PROGRAM (Neighborhood Stabilization Program (NSP) Funded)
Eligible Communities - Bedford, Bedford Heights, Berea, Bratenahl, Brooklyn Heights, Brook Park, Garfield Heights, Highland Hills, Maple Heights, Mayfield Heights, Newburgh Heights, North Royalton, Oakwood, Olmsted Falls, Shaker Heights, South Euclid, University Heights, Warrensville Heights
Maximum Loan (Grant) Amount - Maximum loan amount to buy a foreclosed house is 17% of the purchase price, plus closing costs, plus point of sale repair escrow, not to exceed a total of $39,999.
Household Income Limit - 120% Area Median Income or 2009 INCOME GUIDELINES
Household
Income
Household
Income
Size
Limit
Size
Limit
1 person
$54,450
5 person
$84,000
2 person
$62,200
6 person
$90,200
3 person
$70,000
7 person
$96,400
4 person
$77,750
8 person
$102,650
Eligible Houses - loan is only available for the purchase of foreclosed houses directly from the lender
Purchase Price Rules - Below FHA limit of $200,000
Loan Forgiveness - 100% after 10 years Each participant is evaluated as to his or her mortgage readiness .
Eligible Homes
-Single family, foreclosed homes, purchased directly from a lender -Property must be vacant for at least 90 days before closing -Property must be inspected for code violations and for defective paint -Code violations and defective paint must be corrected before the buyer can take title or occupy the house
Please note: if you are under contract and/or have a purchase agreement in place before the dated certificate of completion you are not eligible for this program.
Program available for a limited time and only while funds are available. Program may be withdrawn at any time.
So you or your client have found a home in a great area in the client's price range. Only one problem: it's in bad shape. The HVAC system is 50 years old, the roof is 40 years old and the windows may as well not even be closed. Plus the kitchen has vinyl floors in 3 different patterns and the counters are all laminate with burns and holes and scars.
Not to fear! Meet the FHA 203K Streamlined renovation loan.
Eligible Improvements Virtually any kind of improvement is eligible provided it becomes a permanent part of the real property and adds value.
Additions to the structure
Kitchen or bath remodels
Finished basement or attic
Patios, decks or terraces
Roofing and landscaping
Safety, energy efficiency and electrical upgrades
Handicapped accessibility improvements
Luxuryitems are not eligible
Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, saunas or alterations to support commercial use
The maximum loan amount must be within the FHA loan amount maximum for the MSA where the home is located and must include the purchase price and the renovation amount. The maximum renovation amount is $35,000 and the minimum is $5,000. Under $5,000 we can do with an escrow of repair funds. A minimum of 10% contingency reserve is required and must also fit into the FHA loan maximums for the area where the property is located. (Any balance remaining on the contingency will be applied to the principal balance and may not be used for additional repairs.)
Yes, it takes a little longer to close an FHA203k Streamline loan than it does to close a standard FHA loan. If you are an agent and you are concerned about that extra couple of weeks just think of it this way: You may make a sale you would not have otherwise made. You may help a buyer get into a home in the area where they wanted to live instead of where they had to live. You can be a real hero for someone.
If you are in Georgia I can help you with the necessary paperwork and give you a short class in how to use the FHA 203K Streamline Rehab loan to purchase, sell or represent homes in today's economy. Never hesitate to call me at any time and I'll be happy to answer your questions.
Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683
Many REALTORS® and even attorneys have fallen to the mistaken belief that the FAR-9 contains a contingency that permits the Buyer to unilaterally terminate the transaction in the event the Property appraises below the Purchase Price.
The reference to the Property's appraised value appears in the Financing paragraph of the FAR-9 as provided below.
FAR-9 Residential Sale and Purchase Contract
Paragraph 3: FINANCING: .... Once Buyer provides the Commitment to Seller, the financing contingency is waived and Seller will be entitled to retain the deposits if the transaction does not close by the Closing Date unless (1) the Property appraises below the purchase price and either the parties cannot agree on a new purchase price or Buyer elects not to proceed, (2) the property related conditions of the Commitment have not been met (except when such conditions are waived by other provisions of this Contract), or (3) another provision of this Contract provides for cancellation.
This is strictly a financing contingency, not to be confused with an appraisal contingency. In order for the Buyer to terminate the transaction using this provision two things must occur: 1) the Buyer must have provided a Loan Commitment during the defined Loan Commitment Period; 2) the appraisal must impact the financing so as to prevent the Buyer from obtaining financing. The simple fact that the appraised value was less than the Purchase Price is not sufficient grounds to terminate the transaction and successfully recover the Buyer's escrowed funds.
Let me provide an example:
Purchase Price $250,000.00
Total Financing $50,000.00
The Buyer provided the Seller with a Loan Commitment during the Loan Commitment Period
In this example the Property appraises for $200,000.00 vs. the Purchase Price of $250,000.00. The question is now: Can the Buyer obtain a denial letter from the Lender based on the appraised value not being able to support the loan with only a 25% LTV ratio? In this example, it would be highly suspect if the Lender would provide such a denial. As such, the Buyer must proceed with the transaction or face the potential of a Buyer's default.
Should the appraised value cause an increase in the LTV ratio that would exceed the allowable limits of the mortgage (ie. LTV increased from 78% to 81%) and the Buyer or the Property does not qualify for the higher LTV financing then the Buyer should be able to terminate upon presentation of the mortgage denial letter.
Obviously, if the appraisal was done prior to the Loan Commitment and it prevented the mortgage approval because of the low value; the Loan Commitment would never be issued and a denial letter should be provided stating the denial was based on the insufficient collateralization of the mortgage loan.
The biggest question should now be how Buyers protect themselves from low appraisal valuations, especially in light of the affects of the HVCC. One might suggest that the Purchase Contract restate the appraisal language in the Special Clause section. Thus, such language outside of the Financing paragraph should create a true independent financing contingency. Example:
Should the subject property appraise below the Purchase Price and either of the parties cannot agree on a new Purchase Price or the Buyer elects not to proceed this Purchase Contract shall be terminated and Buyer's Deposits will be immediately refunded.
This Special Clause would not be necessary in Purchase Contracts using FHA or VA financing. The FHA/VA Addendums address the issue of low appraisal valuations.
This information is not intended to be considered as legal advice. You should always consult, and suggest that the customers consult, with a competent attorney for a proper legal opinion.
Many sophisticated borrowers shop interest rates by searching for lowest APR which, if property stated, is a valid way to compare similar loans. Unfortunately, APR is not always stated properly.
Prepaid Interest is understated - must be 15 days when closing date is unknown.
MI or MIP is not included in the APR on any online rate sites, Bankrate etc.
Some lenders do not include MI or MIP on their web sites such as Amerisave.com
Lender fees are either understated or not included in the APR calculation. This is a tricky one because No or Low Lender Fees does not necessarily indicate a predatory lender. Some lenders charge a higher rate and no points or fees for their so called Zero Cost loan. However, the Zero Cost rate will always be higher than a rate with points and/or fees.
Notes to the above:
there is no such thing as a Zero Cost loan and some states prohibit lenders from advertising Zero Cost Loans.
The spread between Rate and APR on loans greater than 90% LTV should be at least 0.700%. When it is not... you are being scammed
APR was designed to allow consumers to use one standardized number to compare each lender's rate for the same type of loan while rate shopping. It is supposed to represent the borrower's cost and it works like this.
If I lend you, $10,000 and, I charge a $500 Bump-ta-Bump Fee, you will actually receive $9,500, however you must still repay me $10,000. APR is my real yield and your real cost on this loan.
We agreed that you will repay the loan at 8% interest on $10,000, HOWEVER you only received $9,500 therefore I will earn more than the 8.0% interest rate I charge on $10,000. In this case, my yield (APR) is 9.799% on the $9,500 you received.
APR is the lender's yield on dollars actually lent ($10,000 minus $500 = $9,500); in this case, the lender's yield (APR) on $9,500 is 9.799% (APR is computed as if the above example is a 30 year loan)
The $9,500 also represents the Amount Financed in the Truth In Lending (TIL) disclosure.
For those of you who use spreadsheets the Rate Function will find APR. Use the Amount Financed for Loan Amount and use the monthly payment on the actual loan amount.
Fees that must be subtracted from a mortgage loan to properly calculate Amount Financed for APR
Origination and Discount Points
Processing and Lender Fees
Pre-Paid Interest (Use 15 days when closing date is unknown)
Monthly Mortgage Insurance must be added to the payment of all FHA loans and Conventional loans greater than 80% loan to value.
The inclusion of Mi or MIP accounts for the large spread between Rate and APR on loans with mortgage insurance.
NOTES: FeesNot used in APR calculation; third party fees such as appraisal and credit. APR can only be compared on loans of the same type and amortization period
How Do APR Predators Work?
Many sophisticated borrowers shop interest rates by searching for lowest APR which, if property stated, is a valid way to compare similar loans. Unfortunately, APR is not always stated properly.
Prepaid Interest is understated - must be 15 days when closing date is unknown.
MI or MIP is not included in the APR on any online rate sites, Bankrate etc.
Some lenders do not include MI or MIP on their web sites such as Amerisave.com
Lender fees are either understated or not included in the APR calculation. This is a tricky one because No or Low Lender Fees does not necessarily indicate a predatory lender. Some lenders charge a higher rate and no points or fees for their so called Zero Cost loan. However, the Zero Cost rate will always be higher than a rate with points and/or fees.
Notes to the above:
there is no such thing as a Zero Cost loan and some states prohibit lenders from advertising Zero Cost Loans.
The spread between Rate and APR on loans greater than 90% LTV should be at least 0.700%. When it is not... you are being scammed
Rate - Points - Fees are all interdependent
The best way I can explain this is show various Rate - Point - Fee combinations where the lender is making the same gross profit on each combination.
In the examples below, we will use a $200,000 loan amount and Lender gross profit of $1,000, on a day when the Lender's cost for a 5.000% rate is par (0 point).
Best Rate: $1,000 Lender profit in various combinations of points and fees
Rate
Fees
Points
APR
Profit
5.000%
$1,000
0
5.044%
$1,000
5.000%
$500
0.250
5.044%
$1,000
5.000%
$0
0.500
5.044%
$1,000
Lowest Fees: You pay $0 points and fees and Lender's investor pays the lender $1,000 for the higher rate.
Rate
Fees
Points
APR
Profit
5.125%
$0
0
5.125%
$1,000
The point here is that lenders design their loans to provide talking points for their sales staff (loan officers). They all require a certain profit margin and it is not important the way the loan is structured as long as the closed loan delivers their required profit margin.
This illustration also points out the value of correctly stated APR as a way of comparing mortgage loans. For the sake of these illustrations, prepaid interest was not used. If 15 days PP was calculated it would have increased each APR by 0.019%.
I am rebloging this to hear from people that disagree with this proposal. I did post this on the blog itself because out of 173 posts I counted only 8 that disagreed.
Here are my comments, let me know if I am off base.
Because this post was featured in the daily email and I thought the Title was interesting, I stopped by to read the post. As I read thru 173 posts I was surprised to only find 8 posts that I felt disagree with the proposal. Make this #9 that disagree. I support the elimination of the 8,000 credit. While at the same time agreeing with some of the posters that if renewed it should be the greater of the downpayment or a fixed maximum amount. With the tightening loan criteria I see the current stimulus as PAYING PEOPLE TO (that can afford to buy) BUY HOMES. Your proposal continues to do just that and in larger amounts.
I ask everyone that supports this proposal if they support higher taxes and if they support this proposal because they would benefit with more income from sales. People need to ask what is the best for everyone not just themselves.
A lot of real estate agents are speaking as if the door on real estate sales will be slammed shut if the federal tax credit for first-time homebuyers is not extended. And while this opportunity to collect cash has had a very positive effect on sales in the lower price ranges, it really hasn't meant much to sellers with homes valued in excess of $200,000.
My preference is to let this credit just go away. The expiration of the credit could actually lead us back to a true fair market, where buyers buy because they need a house rather than just trying snag a great deal with future profit potential.
I would like to propose an alternative remedy to help sale in all price ranges. My proposal would really create interest in buyers that could really stimulate the market, and it is the only remedy that I have even seen proposed that would actually correct the mistakes of the past.
The solution I am proposing is to make all down payment monies for a personal residence up to and including a cash sale an income tax deduction. Not a refundable credit, just a deduction against income.
This also would encourage buyers with both cash and significant incomes to get back into the market. It would lead us back to the days when more down payment was better, and smaller mortgages would prevent the short position debacle that we are experiencing today.
The higher end market would see an extensive boost in sales, and prices would stabilize. And once again, homeowners will be encouraged to have equity in their homes to cushion them against negative market forces.
So what do you think? A dollar for dollar tax deduction for down payments on a house sounds like a good idea to me!
Just recieved this notification that the new Condo Guidelines are being delayed again. One issue that was of interest to me was how Lenders were suppose to evaluate the Reserve Requirements. On another post here on Active Rain it was said for existing Condominums the guideline would be reserves needed to be funded at 60%. I have seen nothing to confirm that number, hopefully the updates promised by HUD will give the guidance for Lenders.
Implementation of FHA's new policy guidance for condominium project approval and condo unit financing will be delayed until December 7th 2009. The new guidance, to be issued within the next two weeks, will: 1) offer additional leniencies to address the difficult market conditions and 2) augment some portions of FHA Mortgagee Letter 2009-19, providing additional information and clarification.
Until the new guidance takes effect on December 7th, 2009 lenders may continue to use the Spot Loan Approval guidance issued in Mortgagee Letter 1996-41. Further, the site condo and manufactured housing condo project changes that have already been implemented are not affected by this delay.
Dawn, As others have said your post it timely and excellently written. As you said the guidelines presently call for 2 years after Completion date. (no exception per present FNMA guidelines) If a seller is in the position where a mortgage modification that is acceptable to the lender and affordable to the seller it should be considered. This can be a good option for the Lender, the owner and the real estate market if the modification works. However, I hear modifications generally just forestall the inevitable. The owners/sellers have very difficult decisions to make, but they need to understand it is better for them to make the decisions than to make the lender make the decisions.
Hopefully your post will seller facing a difficult decision will contact a professional that understands the options and is willing to work with them.
It should also be noted that I have seen some sellers, realtors and lenders try to coordinate a short sale closing with the purchase of a new property. Unless full and complete disclosure is made to the old lender, new lender, realtors and underwriters, this can create legal problems.
Today I received another call from another homeowner in foreclosure. Burning questions that no one could (or would) answer were pouring out like lava, pent up emotions were finally being released in a meltdown of fear, frustration, sorrow, confusion, anger.
I just listened, acknowledged, and took notes, listening to learn if I would be able to help.
Eventually, in sharing with me, there was some relief from the pressure, and the courage to ask a question about the future arose: Will I ever be able to buy a home again?
Yes! As long as you can financially afford it with a steady source of income and a downpayment, YES. You will be able to buy another house in the future. Usually in about two years after a short sale, you will be eligible to purchase a home and get a loan.
If you opt for foreclosure, it will be seven years, but you will still be able to buy another home in the future, based on standards of the lending community as we know it.
A short sale will give the fastest return to loan eligibility. But even a foreclosure does not mean you will never be able to buy a home again.
The future looks better in time. Here's to your future homeownership and to your financial rescue today.
If you feel you have nowhere to turn for answers to your questions about short sales, loan modification and foreclosure, please call. I can point you in the right direction.
$8,000 First Time Home Buyers Tax Credit, ends Dec. 1, 2009.
Up to $14,999 3 to 1 MATCHING GRANT for First Time Home Buyers in Summit County (Not including Akron, Barberton & Cuyahoga Falls).
Call today to learn if you qualify for many other financial programs!
Chirs, Thanks for the mention in your post. I do agree that anyone looking to purchase and take advantage of the $8,000 should step up their house hunting.
On an added note there are additional tax credits from the Ohio Housing Finance Agency. Information and a calculator can be found here. Funds are limited and only available on a first come first serve basis. The OHFA Tax credit ranges from 20-30% of the interest paid on each year on the loan. Borrowers recieve this credit each and every year they owner occupy the home. On a $100,000 purchase the OHFA credits could exceed $30,000.
Any first-time home buyer in the Greater Cleveland and Akron Ohio marketplace is hopefully well aware of that time is running out on the 8K federal tax credit -- you must close on a home by November 30th, 2009.
For those buyers who are either on the fence or are in the middle of trying to negotiate a short sale, time is running out and you need to act now if you wish to take advantage of it.
I am closing a home purchase this coming week for a buyer (not a first time buyer) and this loan/purchase is closing in under 30 days, so when the right folks (agents, lender, title, escrow, inspectors) are involved, it can happen.
If you are still negotiating with a seller of a short sale property, chances are, it's not going to happen. The bank will still have to approve it, as well as the underlying investor.
If you feel you have waited to long, you haven't. If you start the process now, provided you can get pre-approved for a loan, it's not too late and you can still start and complete the process.
The right agent with the right resources will make or break your home purchase so choose your buyer's agent wisely.
If you need an exceptional lender, Tim Bradford with American Midwest Mortgage has more experience and options than any other lender I know for first time home buyers in the Greater Cleveland and Akron Ohio real estate market.
Thank you Jeff for a great presentation about some of the advertising that consumers see daily. Being in the mortgage industry for many years I am still surprised how many consumer believe these ads. With regard to the false or misleading ads, I suspect that these companies are more than willing to pay the fines because of the profits they make on the loans that they write.
ADVERTISING – Those ads that seem too good to be true.
I have been in the mortgage business for 17 + years. I have seen so much advertising when it came to mortgage companies and how many of the ads were misleading or just flat out lies. Those companies advertising low rates that didn't happen. This easily went on from 1992 to 2002. I always wondered why this wasn't regulated as strongly as it should have been. I found out that some of these companies had 100's of complaints, yet they still operated for those 10 years. I think this is misleading and I call it Shark Advertising. It's dangerously misleading, yet it worked for many companies, at the expense of the borrower.
If anyone has noticed, we haven't see as much advertising from mortgage companies or large banks in the last 18 months or so. I am now seeing a few mortgage companies advertise on the radio and as of lately, a few advertise on TV, especially ESPN. The ads are misleading because they appear to make you believe that it's being backed by the government. Has anyone seen a few ads on tv that look like a news update, a spokesperson telling you about government funded programs or that the government is helping in sponsoring these programs. Yet if you read the fine print, it's a mortgage company, disguising this ad very carefully, spinning it as thought the government is putting this out to the public??
I am even seeing this more and more in such places as Facebook. Below are a few that I am seeing on Facebook now.
Here are some ads found on facebook and comcast.net. As you can see, these mortgage companies and or companies that are lead generators, make you think that the government is behind this. Obama hasn't asked homeowners to refinance. The first one on the left, upper left, is from a company called Lower My Bills. They sell leads to other mortgage companies, after they have gathered your information online. Then you have like 4 to 10 lenders call you, sometimes daily.
People on Facebook that give basic information – eye catchers to pull you in.
Here is a loan officer on Facebook that placed this on his Wall, to capture the attention of others. You just need to be aware of what you read. Sure, this can happen, but there are some unknowns not mentioned. And sometimes the loan officer will raise that unknown, so you can't obtain that great rate and get the next best thing. Keeping in mind, it's not always about the Best Rate. How service? Integrity? Educating the borrower? And so much more.... Please read : I want the same deal that my friend receivd... & Mortgage payment vs Interest Rate
Web Sites that are deceiving !!!!
As I explained in this blog post, deceptive web sites, here is a great example above. Doesn't this look like it could come from the USDA themselves? But it isn't. It acts as a lead catcher, catching your info to call you and or sell you about USDA loans or any other type of mortgage loan. No Cost Obligation is mentioned on the site. - We always love to hear about free things, but are they free overall?
Here is a FAVORITE of mine !!!
I am sure many of you have seen this one on tv, FreeCreditReport.com. The commercial announces a free credit report. But at the very end, it says that you need to enroll in their Triple Advantage program.
A free credit report? They have tons of commercials & commercials cost money to display on TV. They also have like 3 to 4 different kinds of commercials and. producing commercials cost money.
Well, I feel like an investigative reporter for the news. I filled out my info online, trying to see what I get. It says that it takes 3 to 5 days for me to obtain these credit reports from the 3 credit agencies. (giving my credit card #) And then there is a button that says, to obtain your 3 reports now, click here. Imagine that, it's asking for $24.95 now. See the 2nd paragraph on the left, highlighted in yellow? It talks about the new Federal Law and I am wondering if that is what they are sending me now, because that is free. But from what I know, you have to go to annual credit report to get the free reports.
Conclusion : Just be very careful of what you read and what says free, when it might not be free. I always have said, someone has to pay for it from some where. Is it you? Is it me who pays for it?
Shopping for mortgages - The Public Image of Advertising that is misleading !!!! - Part 1 of 2
Shopping for mortgages - The Lending Trees of the World (lead generators) - Part 2 of 2
If cash for the down payment is an issue for you and you are looking for funds to make a purchase of a home for your family, you may wish to look at HUD Homes because you can purchase most of them with only $100.00 Down. Also, in most cases HUD will also pay $2,500.00 in your closing costs and you can ask for additional assistance if needed. If you are a first time buyer you will likely also qualify for the $8,000 Federal Incentive. Also, current the OHFA MCC program has funds available for Bank Owned Properties (HUD Owned Properties Qualify) for a 30% Tax Credit. On a $100,000 purchase this could amount to over $30,000 in Federal Income Tax Credits. Give me a call (or send me an eMail) if you have any questions or would like a referal to a Realtor that sells HUD Homes and is familar with these incentives.
Non Occupanying Co-Borrower loans- Kiddie Condo loans
FHA loans have many features that still aren't talked about as much as one would think, because they are still fairly new to more than have of the loan originators out there. Now, some might argue half is very extreme, even though this is my opinion, I will still stick to this statement for many reasons.
As a loan officer with more than 17 years of mortgage experience, the non-occupant co-borrower program is very simple to understand.
FHA will allow a co-signer that is not living in the house to actually be on the mortgage and co-sign for the loan. Keep one important thing in mind, they must be a family member/relative. And this can be great for first time homebuyers. One thing that so many get confused no matter what type of loan they are applying for is that a co-signer with good credit can't overcome the bad credit of the primary borrower. Meaning that the co-signer with good credit can't get you a better priced loan. If the primary borrower still has lower credit scores that don't qualify, then the loan won't happen.
Now keep in mind that this is a lot different when doing a non-occupant co-borrower loan with a conventional mortgage. Unlike the FHA non-occupant co-borrower loans, which the primary doesn't actually need a job, on a conventional program such as this, that primary borrower still needs to qualify with some type of income ratios. And this usually doesn't help. Besides, in most cases, with the pricing hits on a conventional loan, it would be much cheaper doing a FHA loan. Keep this in mind also, back in April of 2008, HUD allowed this on refinances also. A family could help you refinance your property and not live in the property.
Now, for those of you who remember John Belushi in Animal House, what I consider an American Classic back then, this next part my be very important if you have kids about ready to attend college or are attending college.
The FHA non-occupant co-borrower program can also be known as the Kiddie Condo loan. This basically mirrors the same guidelines as what I explained above. It's just another term and another way to help keep your kids college expenses lower. First off, you don't have to buy a condo. It could be a single family dwelling, or a duplex. One thing that I didn't mention above is that you can't have a co-signer on 3 units or 4 units, not unless they are going to live in the property as their primary.
What's appealing about the FHA Kiddie Condo loan is that you could have other students live in the property and that you could receive rent. A great example :
Duplex : Each unit has 3 bedrooms. Rent goes for about $500 a month. Your total mortgage payment, to include mortgage insurance, taxes, and homeowners insurance is $2,250/month.
You have one son in the property who won't be charged rent. That leaves you 5 other tenants at $500/month. That is $2,500/month. That basically covers your mortgage payment and leaves you a little extra for repairs and such. Your son pays less for attending college, and you get a tax right off, and that you are building equity. Please speak to a tax accountant/CPA for details on this.
Key Point to Remember -
Even though a lot of this sounds easy, you still need to work with a loan officer that is up to date on this kind of financing and on FHA loans in general. A good example : you use to be able to have non-occupant co-borrowers even on 3 units and 4 units, up until about a year ago. One more thing to keep in mind, even though these are HUD's guidelines on FHA mortgages, many lenders have lender overlays. That some lenders might not be able to do what I described above. I know one borrower that already ran into this, after many promises upfront.
Below is one section of a Sellers Addendum that I believe needs to be reviewed with any buyers. Look at section (b). I think most know that seller addendums like these were written by the attorneys for the sellers and the clients they represent. The wording you see in section (b) is similar to what you see on HUD Owned properties, Now I am starting to see it more often on non HUD contract. IF you are asking the seller to assist your buyer with closing cost and encounter an addendum like this, verify with your buyer if they can cover the additonal closing costs that this paragraph will make them libel for paying.
Any Ohio buyers or Realtors that have any questions, please give me a call or send me an Email.
Questions,
comments, or suggestions?
Please contact us:
American Midwest Mortgage Corp.
Telephone: 216-324-8113
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Tim Bradford -- Ohio MB.803389 -- LO.007173
2008 American Midwest Mortgage Corporation.
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Bill Ladewig
A lot of real estate agents are speaking as if the door on real estate sales will be slammed shut if the federal tax credit for first-time homebuyers is not extended. And while this opportunity to collect cash has had a very positive effect on sales in the lower price ranges, it really hasn't meant much to sellers with homes valued in excess of $200,000.
